Netflix Customers Are Quitting Over Price Hikes, but the Company’s Not Worried
Investors are, though.
In Netflix’s move to expand and take over the entire world, their growth in terms of new subscribers has actually slowed a bit. While they’re still moving in the right direction, subscriber numbers are falling short of expectations, and there may be a simple reason why: people don’t like higher prices.
The streaming TV giant had projected an increase of 2.5 million subscribers in Q2 2016, but their actual growth came in at only 1.7 million (which we all know is bad and they should feel bad), according to a letter to investors. As for the reason behind low growth, it might not have had to do with a lack of fresh Netflix addicts but with long-time customers becoming dissatisfied with price hikes. Netflix has been raising rates lately, and older customers had long been “grandfathered” in to their lower rates, but the expiration of that grace period may be why some subscribers are leaving.
They wrote, “Gross additions were on target, but churn ticked up slightly and unexpectedly, coincident with the press coverage in early April of our plan to ungrandfather longer tenured members and remained elevated through the quarter. We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering.”
Despite slower subscriber growth as older members jump ship, Netflix thinks that slightly higher rates to support their expansion and original content is ultimately the right way for the company to go over the long term. They wrote that new subscribers were on target for what they expected. Still, the news has caused their stock price to take a hit, and we have to wonder if preliminary indications of this outcome had anything to do with Netflix’s sudden willingness to share some of their previously secretive viewership numbers recently. It’ll be interesting to see if slowing growth—as Netflix runs out of world to conquer—leads to a change in the company’s preferred metric from subscribers to actual viewers of their shows.
(via The Verge, image via Netflix)
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